Zohran Mamdani, a self-described democratic socialist, won New York City’s mayoral race Tuesday night, becoming the city’s first Muslim mayor and signaling a sharp left turn for the Democratic Party.
Mamdani is a Marxist in the truest sense of the word. He campaigned on rent freezes, expanded public housing, higher taxes on the wealthy, as well as “free” busing and “free” childcare. Whether Mamdani will be able to deliver any of these things is an open question. What’s clear is that he believes he has a political mandate to do so and sees the government as a vehicle to turn around a city in decline.
“We will prove that there is no problem too large for government to solve, and no concern too small for it to care about,” Mamdani purred following his win. In some ways, it’s no surprise Mamdani won. New York City voters have every right to be upset with the stagnant economic conditions in their city. Moreover, the top rival candidate, former Gov. Andrew Cuomo (D-NY), had been accused of sexual harassment, forced from office, and widely criticized for his disastrous handling of the COVID-19 pandemic.
Plus, who doesn’t like free stuff? The problem, of course, is that basic economics tells us there’s no such thing as a free lunch. When Buffalo Wild Wings offers me free wings on my birthday, someone still pays for them — Buffalo Wild Wings. They had to buy the chicken, cook it, and serve it. The costs don’t magically vanish, but BWW is betting I’ll bring friends, buy a beer or two, and spend more than the cost of a few wings. It’s a smart bet, and one BWW is making voluntarily.
Unlike BWW, Mamdani isn’t paying anything himself; he produces nothing and generates no revenue. To pay for his agenda, Mamdani has proposed raising $10 billion in new revenue, mostly by raising the corporate tax rate and slapping a 2% income tax on people making more than $1 million a year.
Two problems appear immediately. First, New York City already faces a $10 billion budget gap, even though it collects more than $140 billion in revenue every year. Before Mamdani can fund anything new, he must first stem the city’s outpouring of red ink. Any new programs will be funded with even more taxes. Reason Magazine’s Christian Britschgi estimates Mamdani will need $18 billion to $20 billion to fund his agenda.
This brings me to Mamdani’s second challenge: the risk of capital flight.
Data show that the Big Apple has been losing residents since the pandemic. The New York City Economic Development Corporation reported last year that from April 2020 to July 2023, the city’s population declined by roughly 546,000 people — about 6.2% of its total. To make matters worse, early signs suggest the city is already feeling a “Mamdani effect,” with wealthy residents leaving for the suburbs.
Mortgage Professional America reports that this urgency is evident in the housing market. Pending home sales in Westchester are up roughly 15% from a year ago, while average showing activity has climbed more than 25% since midsummer, according to Compass agents Zach and Heather Harrison.
“Concerns about higher taxes, safety, and a desire for more space are driving people to act quickly,” Zach Harrison said. Meanwhile, rumors are percolating that Mamdani’s victory spells the end of Wall Street as we know it. Goldman Sachs has an 800,000-square-foot campus in Dallas set to open in 2028, while JPMorgan Chase has shifted the bulk of its employees to Texas. Mamdani’s victory could finally cause the nation’s financial sector to flee the struggling city.
“Texas has made it really easy to do business and really easy to hire,” said Drew McKnight, cochief executive officer of Fortress Investment Group, who has actively expanded Fortress’s presence in Texas.
Elections have consequences, they say. For New Yorkers, the consequences of electing a firebrand socialist to lead their city may not be what they expected.
In a free country, voters have every right to choose their leaders — but dissatisfied citizens also have the right to vote with their feet. In economics, this phenomenon is known as the Tiebout effect, a theory that suggests citizens will move to communities where public goods and tax rates best match their preferences. Socialists have historically prevented this free movement with walls and guns.
WHAT WILL AND WON’T MATTER IN THE MIDTERM ELECTIONS FROM TUESDAY’S RESULTS
Entrepreneurs and businesses are under no obligation to endure an elected official whose ideology has historically produced suffering, misery, and conflict.
New Yorkers, unfortunately, may soon have to experience some of these consequences firsthand.
